Tax Exemption for Stallions in Ireland Due to Expire

Ireland’s 2007 Finance Bill, unveiled in the Irish Parliament on Feb. 1, will end the exemption from tax that Irish stallions have enjoyed since 1969, effective July 31, 2008.

Following a European Commission ruling that the tax-free status of Irish stallion constituted a form of state aid and was therefore illegal under European law, Ireland’s finance minister Brian Cowen announced in December 2005 that the industry’s this exemption would have to cease.
A new taxation scheme that begins Aug. 1, 2008, will allow stallion owners to write off either the cost or the value, whichever is relevant, of their horses over the first four years at stud.
Earnings after this point will be taxed, at 12.5%  if the horse is owned by a company, or at the personal rate if owned by an individual or individuals. Where horses are in corporate ownership, dividends or other payments from these companies will be subject to income tax.
Owners will be allowed to write off their costs against tax in the same way as any business, which they cannot do now. Speaking at about the 2007 Finance Bill, Cowen said: "The same broad business principles that apply to any enterprise will apply here."
Chairman of the Irish Thoroughbred Breeders’ Association, Joe Hernon, said that it was unfortunate to lose the exemption, which had allowed the Irish breeding industry to grow.
He pointed out that Ireland's competitors use a range of incentives to support their bloodstock industries and time will tell if the new rules, which have been framed by the government as generously as possible, will see the country continuing to attract high quality stallions.
The gross cost to the government of the tax break during 2004 was estimated at 10.7 million euros. The Irish breeding industry contributes some 330 million euros annually to the Irish economy.
The tax break has enabled Ireland to become the third most important Thoroughbred breeding nation in the world -- around 10,000 foals are born each year and over 16,500 people are employed.
Hernon commented: "The new proposals are welcome and would indicate that the government is trying to help us compete in an exceptionally competitive, high risk and volatile industry, which is rural based and very labor intensive, We will know the impact in three or four years."